Quiz Clothing joined AIM in 2017 but had a troubled time
The Alternative Investment Market was created to provide a new route to capital for growth firms. TERRY MURDEN asks if it worked
Britpop was in its pomp as Oasis and Blur fought out a north-south, rough boys v posh boys media battle. UK investment banking firm, Barings Bank, collapsed following losses made by broker Nick Leeson, and Toy Story became the first ever full-length film to be created entirely using computer animation.
It was 1995, the year that the Unlisted Securities Market, the junior stock exchange, was replaced by the Alternative Investment Market, or AIM, hoping to provide a cheaper and simpler route for companies to seek money through a flotation of shares. To encourage investors to buy shares in AIM stocks they were even given 100% exemption from inheritance tax (IHT) provided they were held for two years.
Thirty years ago – on 19 June – the Scottish business media was invited to the former offices of the Glasgow Stock Exchange to hear about the LSE’s new baby. What few knew at the time was that there had been talk of basing AIM in Scotland. According to sources at the time it never happened, partly because London – having closed all the regional trading floors – did not want to lose control to market makers 400 miles away.
Fast forward to its 30th anniversary and AIM’s role and future has been questioned as the number of members [firms are not listed on AIM] steadily shrinks. At its peak the index had nearly 1,700 constituents at its peak, but today has fewer than 700.
Firms in the north of Britain, alienated from the money men in the City, still look to grow through bank debt, and though there is more interest in equity finance, the notion of seeking a flotation remains a rare exercise in Scotland. Attempts to create an independent Scottish Stock Exchange have failed to gain traction or credibility.
The reluctance to join public markets has coincided with some poor experiences among Scottish firms. Parsley Box, a ready meals service run by Chris van der Kuyl and Kevin Dorren was floated on AIM in March 2021 but lost almost its entire value in less than 18 months because of a flaky strategy, a series of weak trading updates, and an unwillingness of investors to pour good money after bad.
Glasgow data company DeepMatter cancelled its shares after investors advised that it could more easily raise money as a private company. After struggling with mounting losses, the fashion retailer Quiz Clothing, which floated on AIM in 2017, also decided to leave the market this year.
On the upside, Linlithgow-based telecoms testing firm Calnex Solutions, and the Renfrewshire fintech business Beeks Financial Cloud have helped maintain a small quota on AIM which is headed by Craneware, the biggest software company in Scotland that recently revealed it had knocked back a takeover proposal valuing the company at £940m.
Chris van der Kuyl chaired Parsley Box which had a torrid time on AIM
Craneware’s co-founder Keith Neilson has expressed disappointment over a lack of liquidity provided by AIM but, despite being one of the exchange’s bigger constituents, has shown no appetite in moving to the main market where trackers and others would buy the shares.
Dan Coatsworth, investment analyst at AJ Bell, says despite a slowdown in market activity the number of AIM companies shifting their listing to London’s Main Market so far in 2025 is at a three-year high (if all the intended ones complete) at the halfway point of the year.
Textile rental expert Johnson Service Group and data analytics provider GlobalData recently declared their intention to move up to the Main Market; and asset manager Brooks Macdonald and tech firm Gamma Communications have already completed the transition earlier this year.
“If all the companies complete their transfer, it would be the same number of transfers so far this year as the total number of stocks moving from AIM to the Main Market across 2023 and 2024 combined,” says Coatsworth, adding: “It wouldn’t be a surprise to see more companies follow suit this year, potentially making 2025 one of the busiest years in the past decade for such movement.”
He says it could be argued that AIM was designed to act as a stepping stone to the Main Market and it is a positive that companies feel they’ve reached a level of maturity to move to the premier league. Since 2004, AJ Bell calculates that 130 companies have moved from AIM to the Main Market. Many are now in the top tier indices and others have been taken over at a big premium to the market price.
Keith Neilson led Craneware on to AIM (pic: Terry Murden)
Eleven that joined AIM in its first six months are still on the UK stock market today. A couple have been promoted to the top divisions, namely insurer Hiscox, which is now a FTSE 100 company, and genetics group Genus which has ascended to the FTSE 250.
Anyone who bought Hiscox at its AIM IPO would have subsequently enjoyed a 2,650% total return, which factors in share price gains and dividends. Investment trust Athelney Trust also made the move from being an AIM early bird to joining the Main Market.
“AIM has been called the ‘Wild West’ in the past and has had its fair share of disasters, yet it would be wrong to call the entire market a failure. It was designed to nurture growing companies, and the achievements of Hiscox and Genus prove it has been successful,” says Coatsworth.
“The best performer among those still quoted on AIM is Wynnstay Properties which has delivered a 6,331% total return. Its history lies in developing and managing residential property in London’s Kensington area, but it switched to commercial property in 1972. While the business is still relatively small compared to many real estate stocks on the London Stock Exchange, the rich returns for investors speak for themselves.
“Supplying animal feed to farmers and filling up domestic heating tanks with oil might not sound very glamourous, but it’s been a ticket to steady wealth creation for NWF. A 920% total return since joining AIM in September 1995 is not to be sniffed at.
“AIM has been a good place for small companies to broaden their shareholder base and tap capital markets to accelerate their growth. NWF has made various bolt-on acquisitions over the past three decades, some of which have been part-funded by issuing new shares.
“There are plenty of other examples of similar companies on AIM which are good at what they do, have carved out a market niche, and where their earnings have steadily moved higher. Those ingredients are exactly what many investors want on their menu.”
Marcus Stuttard, head of UK primary markets and head of the Alternative Investment Market, spent a few days in Scotland in 2023 with his colleague Bod Bucky trying to stir more interest in the exchange among Scottish firms.
AIM mission: Marcus Stuttard and Bod Buckby in Edinburgh (pic: Terry Murden)
Stuttard reported tentative enthusiasm among life science and tech firms, though it came against a belief that London institutions were ‘anti-tech’ and that this was persuading growth firms to float in the more tech-friendly US. However, Stuttard noted that in the two years post-pandemic more than 30% of IPOs in London were tech firms.
There were also concerns that, despite AIM’s intention to make flotation easier, it was actually too wrapped up in regulation to make the move worthwhile. The Financial Conduct Authority and the government set about easing some of the compliance rules.
Reflecting on the 30th anniversary, Stuttard says critics will always point to the negatives but admits that investment in growth firms is not where it should be. “It is well known in the UK that our domestic pension funds have reduced their investment in equities in private companies, companies on AIM and the Main Market.
“We have seen some positive developments, the Mansion House accord and references to AIM in the pensions bill, but what we really need to see is our domestic investors backing the UK economy.”
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